This paper studies the effect of campaign contributions to lead plaintiffs — “pay to play’’ — on the level of attorneys’ fees in securities class actions. We find that state pension funds generally pay lower attorneys’ fees when they serve as lead plaintiffs in securities class actions than do individual investors serving in that capacity. This differential disappears, however, when we control for campaign contributions made to officials with influence over state pension funds. Thus, pay to play appears to increase agency costs borne by shareholders in securities class actions.
Date of this Version
Stephen Choi, Drew T. Johnson-Skinner, and Adam C. Pritchard, "The Price of Pay to Play in Securities Class Actions" (August 2010). University of Michigan Program in Law and Economics. Working Paper 2.